"The laws in this city are clearly racist. All laws are racist. The law of gravity is racist." - M. Barry, Mayor of Washington, DC

When you buy a car, truck, or other vehicle on credit, you should be
aware that, until you have made the last payment, your creditor
retains important rights in the vehicle. These rights are established
by the contract you signed and by the law of your state. Your failure
to make timely payments on the vehicle carries serious consequences.
Your creditor will then have the right to "repossess" -- take back --
your car without going to court or, in many states, without warning
you in advance.

However, your creditor's right to repossess your car is subject to
some limitations. In particular, state law places limits on how your
creditor may repossess the vehicle and resell it to reduce or
eliminate your debt. If any rules are violated, your creditor may
lose other rights against you, or even be required to pay you
damages. For further information about the rights discussed generally
below, and about your state's specific repossession requirements,
contact your state consumer protection agency or your private
attorney.

SEIZING THE CAR

Normally, your creditor has legal authority to seize your vehicle as
soon as you "default" on your loan. What constitutes default will be
stated in your contract, but failure to make a payment on time would
certainly be an example.

However, if your creditor has agreed to accept your late payments or
to change your payment date, the terms of your original contract may
no longer apply. Such a change in your credit contract may be made
orally, in writing, or, sometimes, simply by your creditor's repeated
acceptance of late payments without complaint.

Once you are in default, the laws of most states permit the creditor
to repossess your car at any hour of the day or night, without prior
notice, and to come onto your property to do so.

However, when seizing the vehicle, your creditor may not commit a
"breach of the peace" by, for example, using physical force or
threats of force. Taking your car over your protest or removing it
from a closed garage without your permission also may constitute a
breach of the peace, depending on the law in your state.

Should there be a breach of the peace in seizing your car, your
creditor may be required to pay a penalty or, if any harm is done to
you or your property, to compensate you. Also, because of a breach
of peace, your creditor may lose the right to collect a "deficiency
judgment." A deficiency judgment is the difference between what you
owe on your loan and what your creditor receives when reselling your
vehicle. A private attorney or your local legal aid society can give
you guidance about how your state courts have dealt with these
matters.

RESELLING THE CAR

Once your car has been repossessed, your creditor may decide to keep
the car as compensation for your debt or to resell it in either a
public or private sale. In any case, generally your creditor must
notify you about what will happen to the car. Under most state laws,
your creditor must tell you if it wants to keep the car because you
have the right to demand that the car be sold instead. You may want
to exercise this right if the car is worth more than what you owe on
it. Most creditors prefer to sell the car, however, rather than keep
it. If your creditor chooses to resell the car at public auction,
state law usually requires you to be notified of the date so that, if
you wish, you can attend and participate in the bidding. If the
vehicle is to be sold privately, you are usually entitled to a notice
of the date after which it will be sold.

In any of these circumstances, you may be entitled to "redeem" or buy
back the vehicle by paying the full amount owed on it, plus the
expenses connected with its repossession, such as storage and
preparation for sale. Some states have consumer protection laws that
also allow you to "reinstate" your loan. This means that you can
reclaim your car by paying the amount you are behind on your loan
together with your creditor's repossession expenses. Check with your
state consumer protection office to learn what the laws are in your
state.

Any resale of a repossessed car must be conducted in a "commercially
reasonable manner." This does not mean that your creditor must get
the highest possible price (or even a good price) for the vehicle. A
resale price that is below fair market value, however, may indicate
that the sale was not commercially reasonable. A sale made according
to standard custom in a particular business or in an established
market will be considered commercially reasonable in almost all
cases. Failure to resell your car in a commercially reasonable manner
may give you either a claim against your creditor for damages or a
defense against a deficiency judgment. (For an explanation, see the
next section.)

Whatever method is used to dispose of a repossessed car, a creditor
may not keep or sell any personal property found inside. (This does
not include most improvements made to the car itself, such as the
addition of a stereo player or luggage rack.) Your creditor also may
be required to use reasonable care to prevent others from removing
your property from the repossessed car. If you find that your
creditor cannot account for valuable articles left in your car, you
may wish to speak with an attorney about your right to compensation.

PAYING THE DEFICIENCY

Any difference between what you owe on your loan and what your
creditor gets for reselling the vehicle is a "deficiency." For
example, if you owed $2,500 on the car and your creditor sells it for
$1,500, the deficiency is $1,000. In most states, a creditor who has
followed the proper procedures for repossession and sale is allowed
to sue you for a "deficiency judgment" to collect the loan balance.
Several states, however, have consumer protection laws that restrict
creditors from suing for a deficiency when vehicles or other similar
consumer goods are involved. Your state consumer protection agency
will be able to tell you whether this is true in the state where you
live.

If you are sued for a deficiency judgment, you will be notified about
the date of the court hearing. It may be important for you to appear
at this hearing, because it may be your only opportunity to use any
legal defenses you may have. If your creditor breached the peace when
seizing the vehicle or failed to resell the car in a commercially
reasonable manner, these may be defenses against a deficiency
judgment. An attorney will be able to tell you whether you have
grounds to contest a deficiency judgment.

TALKING WITH YOUR CREDITOR

Because it is difficult to dispute a repossession once it has
occurred, you should contact your creditor when you first realize you
will be late with a payment. Many creditors will agree to a delay, if
they believe you will be able to pay later.

Sometimes it may be possible to negotiate with your creditor to
improve your position. If you do reach an agreement to modify your
original contract, be sure it is in writing so that it cannot be
questioned later. You may wish to hire an attorney or contact your
local attorney referral service for low-cost legal help.

However, your creditor may refuse to accept late payments and may
demand that you return the car. By agreeing to a "voluntary
repossession," you may reduce your creditor's expenses in retaking
the car, which you otherwise would be responsible for paying. But
remember, even if you return the car voluntarily, you still are
responsible for paying any deficiency on your loan, and your creditor
still may enter the repossession on your credit report.

If you need help in dealing with your debts, you may want to contact
a Consumer Credit Counseling Service (CCCS). This is a non-profit
organization with more than 850 offices located in 50 states. CCCS
counselors will try to arrange a repayment plan that is acceptable to
you and your creditors. They also will help you set up a realistic
budget and plan future expenses. These services are offered at little
or no charge to you. You can find the CCCS office nearest you by
checking the white pages of your local telephone directory or by
contacting:

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